On Monday, Truist Securities revised its stock price target for Riley Exploration Permian Inc. (NYSE:REPX), a player in the energy sector. The firm decreased its target to $45 from the previous $48 while sustaining a positive outlook with a Buy rating on the company's shares.
The adjustment in the price target reflects changes in the firm's financial model, which now incorporates a revised price deck and updated forecasts for the years 2024 through 2026. The new price target of $45 is a result of a dual-method valuation approach.
The first methodology in the valuation employs a 3.5 times multiple on the estimated 2025 EBITDAX (Earnings Before Interest, Taxes, Depreciation, Amortization, and Exploration expenses) of $319 million. This figure surpasses the consensus estimate of $295 million and is slightly below the peer average multiple of 3.9 times.
The second valuation method is based on a Free Cash Flow (FCF) to Enterprise Value (EV) Yield assumption of 14.0%. This combination of valuation techniques aims to provide a balanced perspective on the company's worth.
The maintained Buy rating indicates Truist Securities' continued confidence in Riley Exploration Permian's performance, despite the lowered price target. The analyst's comments suggest a careful consideration of industry standards and consensus estimates in their analysis.
In other recent news, Riley Exploration Permian has reported a promising start to 2024, witnessing a 4% increase in net oil production from the previous quarter and a 7% rise in operating cash flow before working capital changes.
The company has also successfully converted 40% of that cash flow into free cash flow. As part of its recent developments, the firm acquired 13,900 contiguous net acres in Eddy County, New Mexico, a move expected to enhance its drilling locations and infrastructure.
Riley Permian's RPC (NYSE:RES) Power project is advancing, with projections to cover almost all of the power demand for the company's operations in Yoakum County. Bobby Riley highlighted the strategic decision to self-generate power using residue gas, which is expected to yield high-teen returns and a 35% ownership in the power company, during a Q&A session.
The company has also drilled seven net wells in the first quarter and plans to resume drilling operations soon. Still, it is important to note that the New Mexico project will take time to become fully operational. These are recent developments that provide insights into the company's performance and strategic decisions.
InvestingPro Insights
In light of Truist Securities' revised price target for Riley Exploration Permian Inc. (NYSE:REPX), a look at the latest data and insights from InvestingPro further enriches the investment picture. The company's market capitalization stands at a robust $639.64 million, with a compelling price-to-earnings (P/E) ratio of 5.94, which adjusts to 6.29 on a last twelve months basis as of Q1 2024. This valuation suggests a potentially undervalued stock, particularly when considering the company's significant revenue growth of 26.83% over the last twelve months.
InvestingPro Tips indicate that analysts have revised their earnings upwards for the upcoming period, reflecting optimism about the company's future profitability. Moreover, Riley Exploration Permian has a track record of raising its dividend for 3 consecutive years, a testament to its financial health and commitment to shareholder returns. For investors considering a deeper dive, there are additional InvestingPro Tips available, offering a comprehensive analysis of the company's financials and market performance.
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